STAR-BULLETIN FILE
The average gas price for regular on Honolulu has been above $2 a gallon since August.
New gas-cap plan
to link isle prices
to national indexState Sen. Menor supports
a less-volatile formula
than previously passed
Sen. Ron Menor said yesterday he plans to back an amended government control to ease Hawaii's highest-in-the-nation gasoline prices by tying the prices to nationwide gas prices instead of a West Coast benchmark.
The moves comes in spite of a $250,000 state fuel prices study that rejects price caps, and says gas price controls have caused problems in other places that have used them.
The new cap, proposed by the Citizens Against Gasoline Price Gouging, was introduced at an informational briefing yesterday by the Senate Committee on Commerce, Consumer Protection and Housing at the state Capitol. The Legislature passed a gas cap law in 2002, but the measure's effect was delayed until July 2004 for further study.
Since then, it has been learned that the Legislature's original price cap would have had no effect on gas prices at certain times this year, and would have been set higher than the prices actually were. The cap, tied to West Coast prices, swung up when prices in California went through the roof.
The new cap would take a less volatile national spot price, as reported by the Oil Price Information Service, and calculate the Oahu gasoline price by adding 95 cents a gallon to account for taxes, shipping and profit margins for the oil companies and dealers.
The calculation includes a 16-cent retail margin for dealers on Oahu, and a 24-cent margin for outer island dealers.
The state Attorney General's Office would be able to adjust the exact calculation as needed, said Menor (D, Mililani.)
The average gas price for regular in Honolulu has been above $2 a gallon since August, and prices have been even higher on the neighbor islands, despite recent price decreases on the mainland, according to AAA.
Between June and November of this year, the newly proposed price cap would have saved Oahu consumers an average of 16 cents per gallon of regular gasoline, Menor said. No information was available about the cap's impact on prices over a longer period of time. The citizens group estimates the cap could save Hawaii consumers $92 million a year.
The new proposal, which received only supportive testimony at yesterday's briefing, mainly cleans up concerns about how the original cap would work. The proposal would cap all grades of gasoline, not just regular, and would cover diesel fuel.
The company that did the state fuel prices study, Stillwater Associates, has rejected the concept of a gas price cap. The Western States Petroleum Association, an oil company group, wants the Hawaii Legislature to repeal the pending gas price cap, said Melissa Teves Pavlicek, WSPA's local lobbyist.
Gov. Linda Lingle also has spoken against price caps.
David Hackett, Stillwater president, said the Legislature can come up with many ideas for a less volatile gas price cap. "But at the end of the day, price caps don't work. They either lead to higher prices or reduced service or both," he said.
Stillwater's report called for more monitoring of local gas prices, as well as a long-term integrated energy strategy and consumer education. Hawaii gas prices and gasoline profits are high because the market is an oligopoly controlled by a few players, but the oil companies aren't making excessive profits here because the other oil products that are sold are not as profitable, Stillwater concluded.
Menor said at the outset of yesterday's briefing that those who oppose a gas price cap have failed to offer a meaningful alternative plan.
A light-rail project on Oahu is years away from realization.
Members of the citizens' group railed against the Stillwater report, hammering it for using pro forma financial data to represent oil company profits.
"I would tell you they're not worth the paper they're written on," said Jim Wheeler, a member of the group and an accounting professor who has criticized the tax strategies of ChevronTexaco. Chevron operates one of Hawaii's two refiners and is the second-largest U.S. oil company.
Frank Young, president of the citizens group and a former Chevron dealer, said the report draws false conclusions about the need for price caps here, and has other problems.
Hackett defended the report in a telephone interview. "We used the best available information to create models of the business of these companies," he said. The model is meant to be a basis for discussion.
"Why are you wasting your time worrying how much Chevron is making?" Hackett continued.
The report said Hawaii failed to meet only one of four conditions in which short-term government intervention may stabilize prices -- for profits to be higher than what is required to attract capital for capacity expansion.
Hackett noted that Chevron has been losing share in Hawaii's retail gasoline market over the past 20 years, not growing. "They don't seem to be investing in their stations," he said.
Hackett, a former Mobil manager, said that he's not taking the side of the oil companies. "You can't underestimate the arrogance of the major oil companies," he said.
Stillwater's report looked at the impact of gas price controls in Canada, and concluded that the caps had negligible benefits and led to more price swings and gas shortages.
But Canada's provinces are vast regions that are not comparable to Hawaii's small islands, Young said.
Rural consumers on the Big Island could have to drive a long way for gas if stations go out of business because of the cap, said Pavlicek, of the Western States Petroleum Association.
Young, president of the Hawaii Automotive Repair and Gasoline Dealers Association, countered that he hasn't heard of Big Island dealers who make more than the 24-cent margin provided by the state cap.
"How do they refute the truth? That's basically what's out there," Young said.
Menor said he also plans to introduce a resolution to fund a study of having a state fuel authority enter the gasoline business to increase price competition, something proposed by former gubernatorial candidate D.G. "Andy" Anderson.
